I have BLOWN a gasket in Real Estate !!! Using FHA loans & being upside down ?

Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc


"HOUSTON, we have a major problem with all of these homes upside down"  "People need to put more money down!!!"


homes that are up side down - mortgages that are upside down

Just the other day, a borrower asked this question on Trulia.

What is the difference/advantages between other FHA loan lenders and the lenders approved for the NJ First-Time Homebuyer Program ?

Response by a realtor : "it is probably not wise to buy a house with 3% down anyway. In my opinion, putting 3.5% down is akin to no down payment at all, and that is what got the housing market into trouble in the first place, among other things. Putting 3% down in a declining market will leave you upside down in a few months."  

STOP - It's an opinion, but I think it's a horrible opinion.



save your home with a FHA loan 10% down payment


So Mr. Realtor, you are saying if I put 10% down, then it would have saved many homes from being upside down and possibly many foreclosures?  Or even 20% down? A home buyer then came in and commented. She said :

"That's ridiculous. It’s quite possible for a buyer to have enough resources to handle any major repairs that may arise but still not have enough for a “serious” (I’m assuming you mean 20%) downpayment.

On a $350,000 home a “serious” downpayment would be $70,000.

Even if the buyer had the worst home inspection in the world and had to replace the roof ($20K), the furnace ($6k) and the water heater ($3K) within the first year. The cost of all of those repairs plus the 3.5% downpayment would be around $41,000 which is almost $30K less than the 20% downpayment."


My opinion on the borrowers statements?  There is some truth to this comment.  Read further.



I replied to this realtor and to the home buyer's comment.  Here is what the realtor then said.


fha loans down payments













My Opinion : I don't have a problem with opinions, but it's the opinions often given in the real estate sector that are just thrown out there because you want to be made as the savior of the end to all real estate crap that has taken place in the last 2 to 3 years.



My Take on this ongoing issue of upside mortgages and adequate down payments when it comes to FHA loans. (please read my two articles below, because they will give you details and good opinions expressed by some very good real estate professionals)

  • The real estate mess in the last 2 years was not due to those that used FHA loans and put 3.5% down or even 2.25% down as a down payment.
  • Bad economy overall - sorry to sound negative, but many people have lost jobs, it's a fact, and this has caused many of the foreclosures.
  • What about those bad loans, such as the stated loans aka liar loans, when not verifying income? Did many of these foreclose?
  • Equity position - The argument by this one real estate agent is that if you use a FHA mortgage and put the minimum down, you will be underwater very soon.  Okay, that could be true depending on your appraised value, but let me ask you this.  Why are you buying the home in the first place.  And many people will live in their home for at least 6 years. Food for thought... If you put 10% down and had to sell in 2 years, you will be close to breaking even anyhow, because you normally will be paying a real estate commission of 6%. Again, focus on why you are buying a home.
  • Down payment monies - You can get monies in the form of gifts from family members and or grants from the state or counties. It's out there.


Summary :  Overall, if you are in the market for a home, you feel secure about a specific mortgage payment, and have spoken to a qualified professional loan officer that has gone over your assets and has explained the process to you, then you should be fine. I have a set of questions to ask a borrower, including their goals. One of my main concerns outside of your mortgage payment is to make sure that you have some reserves left over. I would rather have you put less down and keep more money in your pocket, even if you have 10% down. Sorry, but this makes more sense, even when using FHA loans with 3.5% down. Please just don't be scared of comments such as the ones above. Please read :

  • Cash is KING - A larger down payment might not always be your best solution.



UPDATE : The beginning, after Houston, we have a problem... I am against large down payments for many reasons. This should not be the reason not to buy a home. 3.5% down can work and has in the past.



There is still an underlying value in home ownership that does not involve dollars and cents.

- This is an excellent article by Richard Weisser. It's more than just buying a home.  Thanks Richard..



The Government at one time last year was pushing that all FHA loans have a mandatory 5% down. I wrote a series of articles on this :







follow Jeff Belonger on Twitter               The FHA Expert   

                                                                                                           FOLLOW ME ON FACEBOOK



- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -


Experience & Knowledge at its BEST !!!



Follow me on:

Mortgage Myth Busters




For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!


For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors


Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Posted by




follow Jeff Belonger on Twitter


The FHA Expert's fan page on Facebook     Add Jeff Belonger to your network @ LinkedIN

                                                                            FOLLOW ME ON FACEBOOK



- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -


Experience & Knowledge at its BEST !!!



Follow me on:

Mortgage Myth Busters



For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!



For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors


Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Comments (38)

Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation

I'm betting that real estate agent you quoted doesn't hesitate to buy a new car, KNOWING it will be worth less the moment they drive it off the lot.  If they finance that car, they're "okay" with it because they want/need a car and they can afford the payments - regardless of the fact they owe more than the vehicle is worth for the first year or more.

Jun 26, 2010 01:51 AM
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

I have been limiting my Trulia answers to local questions, not even Mi anymore. Real Estate is too local even down to certain towns and cities.


Jun 26, 2010 02:04 AM
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


WILLIAM aka BILL.... . thanks buddy, it had completely slipped my mind.. just couldn't think of it at the time. thanks

JASON.... .  no, I want him as my referral partner... lol  Seriously, one main reason why I posted this.  I want other buyers to read this, just in case they come across realtors such as the one that I mentioned...  thanks


BRIAN... . well, I will semi disagree... there would still be some incentive for using FHA products even with 5% down.  This is why... - FHA loans vs Conventional Loans with 5% down -  It still depends on your credit scores and if low, FHA will still be a lot cheaper.  But you make a great point about the government's irresponsible behaviors...

In regards to your second part... yes, one of the main reasons why I wanted to write about this, to shed some lite to borrowers, so they don't run for the hills, because of statements such as these... thanks


RICHARD.... . boneheaded?  lol  Don't get me started.. and yes, the ones from thousands of miles away are the ones that really get to me.  I just don't get it... are those same agents on every state, for each question?  SAD...

CLAUDETTE... .  I am not sure... trying to save the world?  lol

GABE... .  good point.  What ticks me off about this guy and many other realtors that talk about being upside down in some time period, is that they lose sight to the reason why someone would be buying the house to begin with. Yes it's an investment, but over time.  You don't buy a house and want to sell it in 3 years.  Not unless you are moving because of work or some other unseen circumstance...  Just my opinion.. thanks

MICHAEL... .  lol ... Good one... that would have been a good title... and now you have me thinking of something else.  But yes, the two are completely different.  thanks

MARGARET... .  that would be a great point to throw in his face.. but then we would be all over the map, yelling at each other... lol  thanks

MISSY.... .  I only answer mortgage related questions in NJ... I could in PA and FL... but I don't have the time... and I am focusing in one spot.  But this person was in NJ... so that is a mute point.  It's just that his answers & opinion could scare off some potential buyers... even good ones, but who don't have 20% down...or if they do, they might feel like they need to put all of it down... now they are broke.  thanks


Jun 26, 2010 02:32 AM
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

I only answer Trulia questions for my local market, but I have two buyers right now because of answers there.

This is a bit off topic, but I laugh at some of the shark mentality comments that Realtors® give. What is a buyer to think when they have a string of 5-6 or more "call me" "I'm the best to help you" comments? It's laughable. My buyers were turned off by that and together they total almost $1,000,000 in business.

Jun 26, 2010 03:01 AM
MJ Anton
Ormond Beach, FL

Excellent post...one of the best things that has transpired with the state of the housing industry the last few years, is that the uneducated knowledge-lacking professionals have left the industry...well maybe not all of them

Jun 26, 2010 03:37 AM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

I don't argue with people like that because you aren't going to change an opinion with another opinion. It's better to give them facts such as a snapshot of foreclosure rates as of fourth quarter 2009 from the Mortgage Bankers Association:

Subprime loan foreclosures: 15.58%
FHA loan foreclosures: 3.57%
Prime loan foreclosures: 3.31%
VA loan foreclosures: 2.46%

Jun 26, 2010 04:36 AM
Paul McFadden
Responsive Pest Control - Seattle, WA
Pest Control, Seattle, WA.

Jeff: However much a person puts down is irrelevant. What is boils down to is how responsible is the person to make the payment. I'm not sure FHA loans are defaulting any more than conventional ones. Perhaps there's something I don't know. Thanks for the post!

Jun 26, 2010 05:14 AM
Coleen DeGroff
Coldwell Banker M.M. Parrish Realtors - Gainesville, FL
Haile Plantation Real Estate - Gainesville FL

Jeff - Wow. Thanks for this post. Sounds to me like the Trulia dude was talking out his butt. However, I am not an expert on butt talkers, so those wanting to know for sure need to go seek the counsel of true butt talking professionals, lest I lose my license for practicing outside of my field..


Oh, and to Elizabeth, comment #24 - holy smokes! Great stats!!! Thanks for sharing!

Jun 26, 2010 05:58 AM
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


FRANK & SHARON... .  I have only received one buyer because of Trulia... but I mainly go on there to answer, to educate others... just as we do on this new site of ours now...  www.mortgagemythbusters.com  But yes, most comments left on Trulia are self promotion and it makes me sick.. especially when realtors answer in the questions that are mortgage only related...  thanks

MJ.... .   isn't that the truth... even though so many have left the business, I think I have seen more misleading and incorrect facts that ever before... and thanks for that polite compliment.

ELIZABETH.... . arguing or not, I think of it as educating others.  Even if I go back and forth with someone, at least others can see my conversation and a pattern... and possibly to get another view point and more educated.  And thanks for those stats...

PAUL... .  FHA loans are defaulting more than all other loans... but that is now, and because more FHA mortgages have been used in the last 2 years... and it's the economy, more loss of jobs, higher taxes, etc, etc

COLEEN.... .  What, you don't want to be President of the 'butt talking professionals' club?  As I stated, opinions are good in some cases, but this was way out in left field.  thanks


Jun 26, 2010 06:19 AM
Brien Berard
Remax Professionals Laurel MD - Laurel, MD
Maryland Real Estate Agents - Laurel Real Estate

Jeff, thanks.  The information you put in your post is very helpful.  As a realtor, I end up in this discussion all the time.  Your information will be part of my next discussion.  Thanks.

Jun 26, 2010 06:23 AM
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Can I put in my 2 cents that is an opinion and recommendation I have used for 20 years. Don't focus so much on the down payment although I wouldn't say it is unimportant. I have always told people to not max themselves out on theri ratios because one bad problem like a temporary job loss can throw you into the abyss. Live well within the parmaters of your means.

Jun 26, 2010 10:03 AM
Eric Michael
Remerica Integrity, Realtors®, Northville, MI - Livonia, MI
Metro Detroit Real Estate Professional 734.564.1519

Live within your means. The amount you do or do not put down really doesn't matter (except for PMI purposes, I suppose). The opposite of that "agent"'s comments could probably be true any minute... What if we hit the housing bottom, and they put very little down on a house that's now starting to appreciate? Doesn't that mean their ROI is much better than if they put 10, 20 or even 50% down? (I'm not trying to say that buying a house is akin to investing! Just using the analogy for illustative purposes only)

Jun 26, 2010 12:19 PM
Mark Watterson
Salt Lake City, UT
Utah Real Estate

100% loans, especially those with MI are not the cause of the mortgage crisis. 

We need more fiscal responsible in all aspects of the system.  This starts by homeowners exercising good fiscal management.  Then by holding our public servants accountable for their actions.  Many of our public servants are exercising bad fiscal management in the public sector.

Jun 27, 2010 04:55 AM
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Jeff, I see so much really, really bad advice on Trulia!  Maybe these ignorant responders should join Active Rain and get an education!

Jun 28, 2010 03:39 AM
Janice Roosevelt
Keller Williams Brandywine Valley - West Chester, PA
OICP ABR, ePRO,Ecobroker

I agree with Pat. I continue to be amazed at infomration out there. Excellent post.

Jun 29, 2010 02:10 AM
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

FHA gets people in homes..........

'nuff said ;)

Jun 29, 2010 11:30 AM
Rick Kellow
Cherry Creek Mortgage - West Bend, WI
FHA & Reverse Mortgage Expert

great post Jeff... FHA is one of our only options

Jul 03, 2010 04:52 AM
Michael Ford
Coldwell Banker Heritage Homes - Marion, AR
Matching Families with Homes

Great Post.  FHA is a Great Program and has always been their for the 1st time and move up buyers. 

Jul 05, 2010 03:08 AM
Steve, Joel & Steve A. Chain
Chain Real Estate Investments & Mortgage, Steve & Joel Chain - Cottonwood, CA


I've discovered a great salesman is necessarily a great economist.


Jul 05, 2010 12:00 PM
Tammie Jungling, NMLSR ID 455110
Clearwater, FL

If your in Florida you could have put 20% plus down and still be upside down.  Home ownership is a long term plan and it's a home.  I like your comments and I like Renee Burrows comment. 

Jul 06, 2010 04:25 PM